While many parts of of the Emergency Economic Stabilization Act of 2008 (or what some call the $700 billion bailout[3]) probably upset you, one aspect that did make me smile was the reintroduction of energy tax credits[4]. (You thought I was going to point out the extension to the provision that allowed racetracks to depreciate their tracks over 7 years rather than 15, huh?) The federal energy tax credit for energy efficiency was a benefit I took advantage of two years ago whenever we replaced our aging windows and sliding doors. While it’s great that the credits have returned, one unfortunate aspect is that the $500 credit limit will apply to 2006, 2007, and 2009. We won’t be able to take advantage again.

With home improvements, you have to place the home improvement in service after January 1st, 2009 and on or before December 31st, 2009. If you do anything between now and December 31st, 2008, you’ll be out of luck. I would review the Energy Star chart[5] for the specifics of each improvement, how much you can get from the credit, before making any decisions but I’ll highlight the major ones.

The biggest bang for your buck is in the form of replacement windows and, to a certain extent, doors. For windows and skylights, you can get a credit for 10% of the cost, up to $200, for Energy Star qualified or IECC meeting windows. Labor is not included. For exterior doors, if they meet IECC standards, you can get a credit for 10% of the cost, up to $500.

Insulation is another good way to reduce energy costs without costing you a lot of money and they come with a 10% credit, up to $500. The only requirement is that they must be expected to last 5 years or have a 2 year warranty. One great place to check your insulation levels is in the attic, it’s important to have at least 12 inches of insulation. If you can see your joists, you need more insulation.

Finally, there are a few home improvements that are afforded energy credits. Compliant HVAC systems and water heaters can get a $300 credit. If you happen to live in an area with plenty of sun, solar systems can get 30% off, up to $2000 (there is no $2000 cap if is it’s a Photovoltaic system!), and are not subject to the $500 credit cap. While the credits probably aren’t enough to get you to install it, they are nice if you’ve already made the decision.